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Liquidity management in North America: state of play in 2014

In today’s economic climate, financial professionals in North America are showing signs of confidence and optimism as they plan for the road ahead and continue to seek insights around best practices for attaining company objectives while preserving and leveraging corporate capital. The AFP Liquidity Survey 2014 (again sponsored by RBS Citizens and Citizens Bank), which received 740 responses from a diverse group of companies, the overall findings were that:

  • drivers: safety and liquidity continue to be the top priorities among survey respondents at 68% and 28%, respectively, and yield remains scarce in the marketplace it remains a very distant third
  • even with the end of TAG (Transaction Account Guarantee) program and unlimited FDIC insurance coverage no longer available, an all-time high of 52% of all corporate cash remains with banks. (This is a record percentage for the history of the AFP Liquidity Survey.) 
  • Holdings of cash and short-term investments findings:
  • 52% of short-term investment balances are maintained in bank deposits. (A slightly larger share than the 50% reported in the 2013 survey and the largest share reported since AFP began conducting the Liquidity Survey in 2006. As recently as 2008, the average bank-deposit allocation was only 25 percent.)
  • 75% of all cash balances are maintained in banks, money market funds and treasury securities. (In 2006, the percentage of short-term investments holdings maintained in the same instruments was 56 percent.)
  • organizations invest in an average of 2.7 vehicles for their cash and short-term investment balances, matching the average reported in the 2013 survey report.
  • 75% of short-term investment portfolios are maintained in investments with maturities of 30 days or less. (Also four out of five financial professionals do not anticipate any change in the tenor of their organizations’ investment portfolios over the next year.)
  • more than half reported an increase in their cash and short-term balances over the past year: changes in US and non-US cash holdings are shown below:

Source & Copyright©2014 - AFP

CTMfile take: Confidence is really shown when companies invest their cash in their own business. There is little sign of this or a willingness to return cash to the USA. The continuing preference for holding cash in bank deposits is remarkable.

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This item appears in the following sections:
Cash & Liquidity Management
Cash & Liquidity Mngm in North America
Liquidity Risk Management
Investing Short-Medium Term Surpluses